Running an ecommerce or retail business means balancing a range of roles simultaneously—from managing inventory and customer service to marketing and bookkeeping. Trying to do everything in-house can stretch your team thin and distract from what makes your business special.
One way businesses free up time to focus on what matters most to their brand is by outsourcing core business functions. In fact, an entire global industry exists to support this need—analysts project the business process outsourcing industry will reach about $414 billion worldwide by 2025.
By handing off supporting functions to external providers, even small ecommerce companies can preserve resources and devote more energy to innovation and growth. Learn how business process outsourcing can transform your business operations.
What is business process outsourcing (BPO)?
Business process outsourcing involves contracting a specific business operation or process to a third-party service provider. These processes can be front-office operations (customer-facing) or back-office functions (internal support). Vendors typically offer these as managed services with subscription-based pricing models rather than hourly rates, allowing a business to scale BPO services to its needs.
Front-office BPO handles customer-facing processes that directly impact sales and relationships. These include:
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Customer service and support (call center operations for phone orders, live chat, and email support)
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Sales and marketing services (digital advertising, social media marketing, or telemarketing)
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Technical support and help desks
Back-office BPO takes care of behind-the-scenes operations that keep the business running smoothly. These can be:
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Accounting and payroll (bookkeeping, invoice reconciliation, asset management, and tax preparation)
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Human resources (HR) administration (recruitment, training, and new hire paperwork)
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Legal process outsourcing (contract review, compliance monitoring, legal research, and legal document preparation)
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Information technology (IT) services (website development, cybersecurity, and software integration)
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Inventory management and order fulfillment logistics (3PL for warehouse operations and shipping for an online retailer)
Types of BPO
You’ll typically hear services in the BPO industry categorized by location: onshore, nearshore, or offshore. Each option offers different advantages depending on your priorities around cost, communication, and convenience.
Onshore outsourcing
Onshore BPO means outsourcing to a provider in the same country as your business, avoiding language and cultural barriers and major time zone differences. For example, a Toronto-based electronics retailer could outsource its accounting to a firm elsewhere in Canada. Onshore partners tend to be more expensive than offshore partners, but offer enhanced convenience and familiarity in exchange.
Nearshore outsourcing
Nearshore BPO involves outsourcing to a nearby country, typically in the same region or time zone, to balance cost savings and coordination. A US cosmetics brand might work with a customer support center in Mexico or a fulfillment provider in Latin America. Nearshore outsourcing can reduce costs (when compared to onshore) while minimizing travel time and communication challenges.
Offshore outsourcing
Offshore BPO refers to outsourcing business processes to a more distant country, often in a different time zone. Companies choose offshore partners (commonly in locations like India, the Philippines, or Eastern Europe) to take advantage of significant cost savings. For example, a US fashion retailer could outsource its 24/7 customer service hotline to a call center in the Philippines to benefit from lower labor costs.
Using multiple types of outsourcing
Ecommerce and retail businesses frequently use a combination of all three approaches. For example, a UK-based online rug retailer could hire an IT firm in India for website development (offshore), a logistics partner in a neighboring country for fulfilling EU orders (nearshore), and a UK marketing agency for creative work (onshore).
4 benefits of BPO
- Cost savings
- Increased efficiency and productivity
- Access to expertise and technology
- Operational scalability
By partnering with outside specialists, you can gain efficiency and flexibility for your business. Here are four benefits of BPO, along with examples of how they work:
1. Cost savings
Reducing expenses is one of the biggest reasons businesses choose to outsource. Using a BPO provider often costs less than hiring, training, and maintaining an in-house team for the same function. For example, a clothing brand might delegate its order fulfillment to a third-party logistics company instead of running its own warehouse, saving on rent, equipment, and staff salaries. Lower overhead means your ecommerce business can refine its competitive edge with pricing or invest more in areas like marketing and product development.
2. Increased efficiency and productivity
Outsourcing operations can streamline your business by handing tasks to specialists who can perform them more efficiently. BPO providers are experts in their domains—they have optimized systems and trained staff to carry out processes faster and with fewer errors. As a result, companies often see significant improvements in productivity when they outsource repetitive or technical tasks like fulfillment or accounts.
3. Access to expertise and technology
Partnering with a BPO firm gives a small or mid-sized business access to skills and tools that require time and resources to develop in-house. Outsourcing providers often have specialized expertise, seasoned professionals, and advanced technologies dedicated to a particular function.
For instance, a growing ecommerce company could outsource its digital advertising or SEO marketing to an agency that has deeper knowledge and better software tools for analytics and ad campaign optimization. Likewise, outsourcing IT support and consulting services can give you access to an entire team of tech experts to keep your online store running smoothly, without having to hire full-time IT staff.
4. Operational scalability
Outsourcing makes it easier to scale your operations up or down as demand changes. This flexibility works well for retail, where demand can spike during holiday seasons or sales events and then taper off.
With a BPO partner, you can quickly add more customer service agents or increase order processing capacity to handle busy periods, and scale back when things are quieter—all without the long-term commitment of hiring or investing in new facilities. For example, a toy retailer may expand their contract with their outsourcing call center to field the flood of customer inquiries during the pre-Christmas rush, then reduce to standard service levels afterward.
Outsourcing can also extend your operating hours or geographic reach—you can serve customers 24/7 by using support teams in different time zones or expand into international markets with the help of local BPO teams who understand those regions. This kind of agility lets your business respond more rapidly to market changes and seize new opportunities.
Drawbacks of BPO
- Less quality control
- Communication and time zone challenges
- Data security and privacy risks
- Hidden and unexpected costs
- Public perception and staff morale
While BPO offers many benefits, there are a few drawbacks worth considering when deciding which processes to outsource:
Less quality control
When an outside provider takes over one of your business operations, you inevitably lose some direct control over the final product. The outsourced team may not have the same depth of knowledge or passion for your brand, products, and customers as your in-house staff. This can lead to inconsistencies in quality or service. For example, if a retail company outsources its customer support, the agents working for the BPO firm might handle inquiries in a more generic way, which could dilute the personalized experience your brand is known for.
There’s also the risk that the vendor’s standards for quality assurance differ from your own. If not managed closely, an outsourced fulfillment center might pack orders less carefully, or an outsourced content team might produce marketing copy that doesn’t fully capture your brand voice. To mitigate this, invest time in training the vendor, setting clear expectations, and monitoring key performance indicators.
Communication and time zone challenges
Outsourcing, especially offshore, can introduce communication barriers. Differences in language proficiency, work culture, or time zones can make coordination more difficult. For instance, a Canada-based ecommerce seller outsourcing website development to a team in Eastern Europe could experience a critical issue while the European team is offline for the day.
Even onshore or nearshore partners can operate on slightly different schedules or use different communication styles. Miscommunications or delays can occur if instructions aren’t clear or there’s no overlap in working hours to discuss problems in real time. Cultural differences may also affect how often either side provides feedback or reports issues. All these factors mean companies must work harder at communication—scheduling regular check-ins, using collaborative project management tools, and building good rapport—to ensure the outsourced process runs smoothly.
Data security and privacy risks
Whenever you outsource a business process, you’ll likely need to share sensitive data or give external personnel access to your systems. This creates potential security and privacy risks.
For example, a retail company outsourcing its customer service will need to share customers’ personal information with the BPO provider. If that provider has a security lapse or weaker data protection protocols, customer data could be compromised. Incidents like data breaches or misuse of confidential information can harm your business’s reputation and trust with customers.
Outsourcing overseas might also raise compliance issues with data privacy laws (for instance, ensuring GDPR compliance if an overseas call center handles your European customer data). Thoroughly vet your BPO vendors for their security measures and, when needed, invest in encryption, access controls, and strict contracts to protect data.
Hidden and unexpected costs
While cost reduction is a major appeal of BPO, outsourcing isn’t always as straightforward or affordable as it seems. Hidden costs and challenges can erode your expected savings. For one, managing an outsourcing relationship requires time and resources—you may need a liaison or manager to coordinate with the vendor, which is an added personnel cost.
There are also potential expenses in knowledge transfer and training: If you outsource your inventory management, you must spend time and energy to get the external team up to speed on your product catalog, software systems, and processes. If the outsourcing engagement doesn’t work out and you need to switch providers or bring the function back in-house, that transition can be costly and disruptive.
Outsourcing services sometimes come with extra fees (for example, change requests, overtime support, or integration costs) that weren’t obvious upfront. For complex operations especially, any misalignment or underperformance by the vendor can translate into lost sales or customer dissatisfaction, which are indirect costs to your business. Conduct a cost-benefit analysis and maintain realistic expectations of the return on investment (ROI) from outsourcing, accounting for management overhead, and contingency plans.
Public perception and staff morale
Outsourcing can have reputation and morale implications. Customers and the general public sometimes view outsourcing negatively, associating it with job losses in the local economy or lower service quality. You might face backlash for moving work overseas or away from the community—some shoppers deliberately seek out companies that keep jobs local.
Similarly, your existing employees might feel anxious or demoralized if they see their duties being outsourced. Team members could worry about job security (“Will my position be next?”) or feel less valued if certain roles are outsourced. This can hurt workplace morale and loyalty. To manage this drawback, communicate transparently about why you’re outsourcing and how you’ll maintain quality. Some companies choose to highlight how outsourcing helps them serve customers better or free up their in-house team for higher-value work, rather than simply framing it as a cost-cutting move.
Be thoughtful about the narrative—both publicly and internally—around your use of BPO, so you maintain trust with your customers and confidence among your staff.
Business process outsourcing FAQ
What is business process outsourcing?
Business process outsourcing is when a company hires an external firm to handle specific business tasks or functions instead of doing them internally. It allows a business to delegate operations like customer support, accounting, or IT management to a specialized external service provider.
What does the BPO company do?
A BPO company provides services to other businesses by taking over certain processes on their behalf. For instance, a BPO provider might handle all the payroll processing and HR administration for a client, or run the client’s technical support hotline—essentially acting as an external department for that aspect of the business.
What are the functions of business process outsourcing?
BPO can cover nearly any business process function that can be delivered from an outside location. Common functions outsourced by ecommerce and retail companies include customer service, tech support, bookkeeping, human resources, marketing, data entry, and supply chain management (like warehousing and order fulfillment).